THE ENFORCEMENT OF PATENT RIGHTS
Intellectual Property Advisory Committee (IPAC)
November 2003
INDEX
Page
EXECUTIVE SUMMARY 5
SUGGESTIONS 7
1 INTRODUCTION 11
2 BACKGROUND AND SUMMARY OF CURRENT POSITION 15
2.1 History of patent litigation 15
2.2 DTI innovation review 16
3. PROBLEMS WITH THE ENFORCEMENT OF PATENTS 17
3.1 Lack of financial capability to enforce patents 17
3.2 Overseas 18
3.3 A comparative study of patent enforcement systems – England 19
and Wales, France, Germany, the Netherlands and the USA
3.4 Legal representation in the UK 22
3.5 The validity issue 23
3.6 Damages 24
3.7 Threats 24
4. POSSIBLE SOLUTIONS 25
4.1 Court procedures - further abbreviated procedure 25
4.2 Court procedures - appeals 26
4.3 Deregulation of professional roles - removal of restrictive practices 28
4.4 Alternative Dispute Resolution (ADR) 29
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4.5 Patent Office involvement - patent validity 31
4.5.1 Re-examination 31
4.5.2 Amendment 31
4.5.3 Effective, Timely Procedures 32
4.6 Updated patent validity assessment (legally non-binding) 32
4.7 IP Insurance as a means of enabling enforcement 33
4.8 Alternative fee arrangements 34
4.8.1 Maintenance 34
4.8.2 Conditional Fee Arrangements 34
4.8.3 Contingency Fees 34
4.8.4 The Community Patent 35
4.8.5 Conclusions On Alternative Fee Arrangements 35
4.9 Corporate governance 36
4.10 Proposed EU Directive 37
4.11 International 37
4.12 File wrapper estoppel 39
4.13 Patent defence union 39
4.14 Patent enforcement fund 40
4.15 Tax incentives 40
4.16 Licences of right 40
4.17 Data and evidence 41
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APPENDICES
APPENDIX 1 Streamlined Procedure 42
APPENDIX 2 Overseas Patent Systems 45
APPENDIX 3 Further Abbreviated Procedure 52
APPENDIX 4 Summary of the Proposed “Directive of the 54
European Parliament and of the Council on
Measures and Procedures to Ensure the
Enforcement of Intellectual Property Rights”
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THE ENFORCEMENT OF PATENT RIGHTS
Intellectual Property Advisory Committee (IPAC)
EXECUTIVE SUMMARY
1. The problems, perceived and actual, of enforcement of patents are reported
regularly by patentees and potential patentees as a handicap to the effectiveness of
their rights or a disincentive to apply for them. Although much has already been
done (particularly by the judiciary) to improve patent enforcement there remain
real problems which will need to be addressed if there is to be further progress.
We believe that the time is right for a new approach.
2. A fundamental problem is that, although the "quality" of justice in the Patents
Court is well regarded, cost compared with the rest of the EU is very high and,
frequently, prohibitive for the SMEs and individuals. There are suggestions even
that larger companies are increasingly taking their infringement litigation to other
European jurisdictions on the grounds of cost. Why, then, is the London Patents
Court so expensive? One reason is that the forensic approach to patent litigation
enabled by common- law-driven procedures in this country is out of step with the
requirements of industry. We believe there is a good case for changes to how the
system works.
3. The current shortcomings of patent enforcement procedures in the Patents Court
also need to be considered in the light of the planned introduction of the
Community Patent in 2007, followed by the Community Patent Court in 2010.
That Court will, effectively, be a European Court of First Instance – located in
Luxembourg – which will have exclusive jurisdiction over proceedings concerning
the validity and infringement of Community Patents. The Court will have its own
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procedures and, given its high reputation amongst patent jurisdictions in Europe,
the UK should play a leading role in developing those procedures.
4. More immediate, however, is the need to develop a consistent and satisfactory
system for enforcing European patents [EPs]. The EP will continue alongside the
Community Patent and play an important role in the innovation process. This
Report identifies the current issues, highlights why the present procedures of the
Patents Court are failing to meet the needs of users of the patent system and
proposes changes aimed at positioning the Patents Court as the European
jurisdiction of choice. This presents an opportunity for Government to take a
leading role in this aspect of the development of the European Union.
5. IPAC's role is to identify issues, taking a broad strategic approach. Accordingly,
we have looked at patent enforcement in the round, considering not only the legal
process but also the role that the corporate governance, mediation, patent litigation
cost insurance and Patent Office procedures may have in assisting dispute
resolution. Our conclusions are set out below. In many cases we have not been
able to make formal recommendations in detail because the empirical or evidential
basis for such recommendations is absent or deficient. We reinforce an earlier
recommendation to remedy this. Nonetheless we point to areas where we believe
that further work by, or sponsored by, Government is necessary or desirable and
where we think there may be a good case for change. Certainly we see no grounds
for the UK to be complacent on this subject.
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SUGGESTIONS
COURT PROCEDURES
a) we propose active promotion of the currently little-used “Streamlined
Procedure” in the Patents and Patents County Courts. A "Further Abbreviated
Procedure" should be introduced in the Patents County Court and Patents Court
to further reduce costs, and with a view to acting as a model for a corresponding
low cost procedure associated with the Community Patent (see 4.1.1)
b) appeals in Patent Actions should be subject to rigorous leave to appeal
requirements and, where leave is given, the appeal should be prosecuted under
an abbreviated procedure (see 4.2.1 – 4.2.2)
DEREGULATION OF PROFESSIONAL ROLES
c) practitioners qualified as more than one of barrister, solicitor or patent attorney
should be allowed to practice in any discipline in which they are trained and
qualified. Barristers should be allowed to provide litigation and advocacy
services directly to the public (see 4.3)
d) Judicial appointments to a Patent (or wider IP) Tribunal should be from all IP
disciplines and the statutory amendments to enable this should be made.
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ALTERNATIVE DISPUTE RESOLUTION
e) for a trial period (see 4.4)mediation should be mandated by the Patents Court
and,
f) to encourage appropriate participation in mediation, it should be made clear that
failure to participate satisfactorily may lead to the penalty of an adverse cost
order
RE-EXAMINATION AND OTHER PROCEDURES WITHIN THE PATENT
OFFICE
g) the Patent Office should offer a re-examination service, and seek to include
this topic in patent practice harmonisation discussio ns with other national
offices (see 4.5)
h) amendment procedures should be simple and not open to opposition, with a
view to speedy disposal
UPDATED PATENT VALIDITY ASSESSMENT
i) the Patent Office should consider offering an administrative updated patent
validity assessment service (see 4.6) with the courts linking the award of costs
to whether an Updated Patent Validity Assessment had been obtained by the
patentee before commencement of proceedings
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PATENT COST INSURANCE AS A MEANS OF ENABLING
ENFORCEMENT
j) the Patent Office should monitor this area. We also recommend the setting up
of a Working Party to investigate whether an insurance scheme for patent
litigation costs can be commercially viable (see 4.7)
CORPORATE GOVERNANCE
k) we suggest that an audit of IPR should form part of any company's annual
audit. Such an IPR audit should include a risk assessment of the company's IP
portfolio and any patent notifications by other patent owners implying or
directly asserting patent infringement. It should form part of the annual report
and accounts, at least to the extent that a statement that such an IP risk
assessment has been undertaken would form part of the "signing off"
responsibilities of the directors (see 4.9)
THE PROPOSED EUROPEAN DIRECTIVE ON ENFORCEMENT OF IP
l) we recommend that Government support finalising and then quickly
implementing the proposed Directive, with the proviso that criminal law
provision should only be applied in the most extreme circumstances (see 4.10)
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INTERNATIONAL
m) Government sho uld take a European and international lead in promoting more
consistent and timely IP enforcement systems (see 4.11)
n) in Asia, particularly the PRC, the UK should promote the positive role of IP in
a modern economy.
o) the Patent Office should make more explicit, via its website, the nature and
scale of the problems that may be encountered in other jurisdictions to help
owners and potential owners understand better the difficulties they may have
to manage.
ALTERNATIVE FEE ARRANGEMENTS
p) we recommend making available US-style contingency fee agreements for
patent disputes for a trial period (see 4.8).
ADDITIONAL PROCEDURAL REFORMS TO BE CONSIDERED
q) the introduction of a new procedure to prevent the enforcement of a patent
inconsistently with representations made in the course of prosecuting the
application.
r) the ability to halve renewal fees by endorsement of the patent "licenses of
right" should be more vigorously promoted (see 4.25).
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1 INTRODUCTION
1.1 This Position Paper provides a background to the enforcement of patents. It
identifies the serious problems that exist, considers alternative solutions and makes
final recommendations.
1.2 IPAC’s terms of reference include the following objectives:
• advise DTI Ministers and the Patent Office on how intellectual property
can best contribute to DTI and wider Government objectives; and
• endeavour to identify problems with the way the IPR system is working
and look for early signs of potential risks and challenges to the system to
help inform DTI Ministers and the Patent Office.
Specifically, this includes consideration of:
• how to foster the development of an international and European
intellectual property rights (IPR) system which encourages innovation and
competition and promotes global trade, for the benefit of commerce,
industry and consumers;
• how best the intellectual property system can meet the needs of small and
medium-sized enterprises (SMEs) as well as large businesses, and
maintain a balance between the interests of right owners and users;
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• the wider economic impacts of IP policy; and
• the interface between IP protection and competition policy.
IPAC decided early in its life to look at the enforcement of IPRs. We set up an
Enforcement Group charged with reporting on the efficacy of the process for the
enforcement of patents in the UK and also in the broader context of the major
markets for UK industry in other countries. We focused on patents rather than all
IPRs because the issues in each sector, though overlapping, are not exactly the
same and we judged it better to concentrate on one clearly defined sector.
However we are well aware that patents are not the whole, or only, story and we
may wish to revert to the broader theme at a later date. The Group has drawn upon
its own UK and international enforcement experience as well as consulting with
many outside IPAC. IPAC’s role is to take the broad strategic view, identifying
issues and stimulating further discussion.
1.3 Our starting point was that patents are important to the economic welfare of the
European Union. To be useful, patents have to be enforceable. The creation and
exploitation of new inventions are critical parts of the innovation process. An
integral part of the exploitation and use of patents is the ability of the owner or
licensee of the rights to enforce them where necessary so as to prevent
unauthorised use, colloquially called infringement. Only a small percentage of
patented inventions are sufficiently commercially successful to result in their
infringement and these are the important patents from the point of view of wealth
creation. A deficient enforcement system hinders their exploitation. SMEs, in
particular, are less likely to invest time in R&D and investors are less willing to
support R&D if enforcing the underpinning patents is unaffordable. This barrier to
the enforcement of patents is also thought to be a disincentive for many firms to
seek patent protection for their inventive ideas. It is, however, recognised that
facilitating the assertion of invalid patents is also a serious problem and a balanced
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view of enforcement is essential. This calls for a legal system which provides
affordable access to justice for both patentees and accused parties alike.
1.4 The UK patent enforcement system does not at present fully meet this need. It is
high quality but it is often simply too expensive for many litigants, particularly
SMEs. With costs of a typical infringement/validity action in the High Court at
around £1 million, it severely limits the number of individual inventors and
companies which can afford to enforce or defend their patents. The situation is
still more acute for UK companies enforcing patents in the USA, where costs are
(in the main) non-recoverable and typically in the region of US$2-5 million for a
patent infringement case of average complexity.
1.5 IPAC recognises the work undertaken over the last 10 to 15 years to improve the
speed and lower the cost of litigation in the UK. However, even with the recently
introduced “Streamlined Procedure”, our information indicates that there is still
likely to be only a small proportion of patent disputes resolved by the courts,
owing to the complexity (some of which may be unnecessary) of the common law
system and the consequent high cost to litigants. In the context of the Community
Patent and the proposed European Directive on the enforcement of intellectual
property rights 1 , the United Kingdom, quite simply, cannot afford to be out of step
with the remainder of the Community. However, the aim should not just be
competitive in terms of price but to maintain our reputation as European ‘market
leader’ in terms of quality of justice. In that context, we recognise that in some
circumstances the complexity of the common law system may in fact produce
‘more justice’ for all parties.
1
Proposal for a Directive of the European Parliament and of the Council on measures and procedures to ensure the
enforcement of Intellectual Property Rights. COM (2003) 46(01), Commission of the European Communities, January
2003.
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1.6 Any consideration of this issue must take into account the newly agreed
Community Patent. This patent is intended to eliminate differences in national
approach to litigation across EU Member States by establishing a European Patent
Court of First Instance and an Appeal Court, which will eventually operate entirely
separately from the national court systems of Member States.
1.7 In our view, the United Kingdom should anticipate the inevitable changes which
the new Community Patent system will bring and should undertake a root and
branch review of the suitability of our present legal system to meet the needs of
users, both today and in the future. We urge Government to lead the way in this
respect. The work thus far on the existing system can only produce marginal
improvements.
1.8 IPAC suggests that it may well be time for a totally new approach which takes into
account not only the legal system but also the role that Patent Office procedures,
patent litigation cost insurance, corporate governance and mediation might have in
assisting dispute resolution. We set out our analysis and recommendations below.
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2. BACKGROUND AND SUMMARY OF CURRENT POSITION
2.1 HISTORY OF PATENT LITIGATION
2.1.1 Patent litigation in the UK, and in particular in England and Wales, has undergone
many changes over the last 15 years. Patent litigation was for many years mainly
the preserve of patent agents and a handful of specialist barristers and solicitors.
With the increase in importance of IPRs generally, procedures grew in complexity
and consequently cost. This led to the formation of the Patents County Court as an
alternative low-cost forum in the Copyright, Designs and Patents Act 1988. The
Patents Court (a division of the High Court) has in the last decade pioneered
procedural reforms which have significantly reduced the time to trial and the
complexities of the previous, essentially party-driven, procedure. That is to be
welcomed. IPAC endorses the excellent work done by the Patents Court Users'
Group and the "Streamlined Procedure" that is now available in both the Patents
Court and the Patents County Court (see Appendix 1).
2.1.2 However, the relatively high cost (actual and perceived) of enforcing patents in
England and Wales (which still obtains) by comparison with costs in other major
European patent jurisdictions reflects the fundamental difference between the
common law system and procedures and the (essentially) written procedures which
apply in the civil law system of continental European Member States. It is not a
result of substantive patent law differences, because the law has, to all intents and
purposes, been harmonised through implementation of the European Patent
Convention.
2.1.3 Particularly for SMEs, failure to stop an infringement promptly can lead to
destruction of their entire business; in other words, justice postponed is justice
denied. The Patents Court needs to go further to provide access to justice for the
party who requires a fast, effective and affordable forum to adjudicate urgent
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matters. In this respect, we welcome the present willingness of the Patents Court
to give directions for expediting trial, exceptionally within as short a period as 4
months, in appropriate cases.
2.1.4 However, the Patents Court tends not to entertain preliminary (or pre-trial)
injunctions in patent matters, preferring to expedite trial. Applying the principles
laid down by the House of Lords in the American Cyanamid - v - Ethicon (1975)
AC396, the Court is not concerned with a preliminary merits-based evaluation but
more with maintenance of the status quo pending trial. The exception to this has
been a recent tendency to award preliminary injunctions where pharmaceutical
patents are concerned and the Defendant is unable to satisfy the Court that:
(i) the potential damage to the Patentee is not irreparable (for example, the
irreversible price erosion which the entry of an infringing medicinal product
may produce), and/or
(ii) if such damage is quantifiable, that the Defendant has adequate means to
compensate the Patentee if the patent is held to be valid and infringed at trial.
2.2 DTI INNOVATION REVIEW
The Innovation Review being carried out by the UK Department of Trade and
Industry is concerned with examining innovation in its broadest sense in the
context of its contribution to the economic well-being of the United Kingdom.
Innovation is approached on two bases. They are both the activities of producing
new inventions and ideas, and the exploitation of those creations. As noted above
(paragraph 1.4) the ability to enforce patents is integral to exploitation. The review
process recognised the importance of enforcement to successful innovation and we
hope that our proposals can be taken forward as part of the implementation of the
Review.
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3. PROBLEMS WITH THE ENFORCEMENT OF PATENTS
3.1 LACK OF FINANCIAL CAPABILITY TO ENFORCE PATENTS
3.1.1 There is a widespread belief amongst individual inventors and SMEs that their
patents can be knowingly infringed by wealthier companies without serious regard
for the consequences. The problem is seen as particularly acute in relation to
inventions that require little capital investment to copy, or are infringed by a large
number of parties each of which would generate relatively little in damages. The
same concern affects those larger companies which operate as an aggregation of
smaller units, each of which has the same cost constraints as if it were an SME.
On the other side of the coin, a patent which provides a potential 20 year monopoly
for products and processes is a potentially very valuable business asset. The price
of enforcing that monopoly is a business expense and that cost should, perhaps, be
viewed in proportion to the value of the asset to the business.
3.1.2 It follows that the patentee (whether SME or large corporation) must recognise
from the outset the costs involved not only in obtaining patent protection but also
of maintaining that asset. This concept is generally recognised in some industries
such as biotechnology but not so widely appreciated in traditional manufacturing
industries. Maintenance, of course, includes the cost of enforcing the rights
conferred by a patent, namely to prevent infringement. Many obtain patents
unaware of the potential financial risk involved and without the ability to maintain
and enforce the rights which those patents confer. IPAC has already identified
very low IP awareness as a key generic problem. We understand this issue is being
addressed in the Innovation Review.
3.1.3 Notwithstanding a need for greater awareness, we need to make patent
enforcement at least as affordable in the United Kingdom as it is in other EU
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Member States, notably Germany and the Netherlands, both of which are
recognised as having high quality lawyers and judiciary in patent matters.
3.2 OVERSEAS
3.2.1 IPAC’s investigations (see Appendix 2) show that, broadly, British industries’ key
markets are North America (particularly the USA), Europe and Asia (particularly
China). In those jurisdictions we observe:
(i) USA: the process is procedurally complex, costly and uncertain in outcome
at first instance, largely because of a lack of a common approach from a
judiciary generally inexperienced in patent matters 2 . The jury trial system
typically favours US litigants.
(ii) Continental Europe: compared to the English Patents Court, the process
elsewhere in Europe is less expensive and less complex. There is, however,
a lack of consistency of outcome across the European Union, owing to
differing procedural law and levels of expertise amongst the judges.
Examples of this include claim construction and the “research exemption”.
(iii) Asia: copying and counterfeiting are endemic, although Japan and
Singapore are exceptions. Even where (as in the People’s Repub lic of
China) adequate enforcement provisions are in place, there is little business
appreciation of the positive role of IP in a modern economy and of the need
to respect and enforce IPRs. Although the machinery is in place, its
effectiveness is questio nable.
2
There are, of course, exceptions to this,. For example, the District Courts of Delaware, Virginia and Northern
California have considerable experience of trying patent cases.
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3.2.2 As a minimum, patentees need to be aware of the risks and potential costs
associated with enforcing rights in other jurisdictions. Although there are self-
evident drawbacks to the idea we believe that it would be helpful for the Patent
office to provide a plain man’s guide to the realities of this on its website.
3.3 A COMPARATIVE STUDY OF PATENT ENFORCEMENT SYSTEMS –
ENGLAND & WALES, FRANCE, GERMANY, NETHERLANDS AND USA
3.3.1 As part of its review of the patent enforcement procedure, IPAC has taken
evidence from patent lawyers in four other jurisdictions, USA, France, Germany
and the Netherlands. A chart of features of the different jurisdictions is included in
Appendix 2. In Germany, where infringement is tried separately from validity,
time to trial on the infringement issue was in the past significantly quicker than in
the English Patents Court: for example, trial within nine months for the Düsseldorf
Court on a matter of medium complexity. Now, however, with the accelerated
procedures and scheduling adopted by the English Patents Court, there is in effect
no real difference in time to trial between the two jurisdictions. In fact, since
infringement and validity are tried together in the High Court, the overall
procedure in this country is now probably quicker than in Germany. Cost,
however, remains the disincentive to using a UK jurisdiction. Although it is
difficult to make exact comparisons costs in the English Patent Court can be of the
order of four times greater than its counterpart court in Germany. IPAC has used
what data is available. However, the lack of good comparative data and analysis is
a good example of the general lack of hard data and evidence around IP.
3.3.2 While time to trial at First Instance is no longer a real issue in England and Wales,
time to appeal is still too protracted, although the U.K. is not necessarily out of
step with the rest of Europe in this respect. The time to appeal and availability of
appeals are addressed in 4.2 below.
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3.3.3 The Single Market needs both national patents and European Patents to be
governed by consistent application of substantive and procedural law. Currently,
there are significant procedural differences between the common law countries and
the remainder of Europe. The English common law system is seen to be costly and
procedurally complex, although proponents of the system say that it has the
advantage (through disclosure and cross-examination) of being able to get to the
bottom of things and (because validity and infringement are considered together) to
be able to come to more balanced and rounded conclusions.
3.3.4 Given the tendency of the granting authorities, in particular the European Patent
Office (EPO), to give the benefit of the doubt to applicants at both the application
and opposition stages, one view is that validity should be open to robust challenge
and de novo consideration "English style" during infringement proceedings. A
contrary view is that, where a patent has survived EPO Opposition and Appeal, it
is inappropriate for National Courts to engage – as the English Patents Court is apt
to do - in a forensic reassessment of validity. The exception to this should be that
where new and potentially relevant material is produced before the Patents Court,
which material was not before the EPO, it is right that validity should be examined
de novo against such new material. Such de novo reconsideration is, however, also
applied in any event in the three European jurisdictions considered. So there is
little difference between the jurisdictions in this respect. Additionally, in Germany
it may be said that the system may do injustice to defendants because validity
cannot be considered as a defence by the infringement court.
3.3.5 The bottom line, therefore, is that the English system can be more expensive than
its European counterparts with little difference in the remedies available or quality
of justice. Costs of litigating in the USA are even higher than the UK, but those
costs can be acceptable where, because of the market size, damages can offset
them. This is not the case for any individual European jurisdiction. Additionally
contingency fees arrangements can alleviate the costs risk (see 4.8 below)
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3.3.6 Preliminary Relief:
A preliminary injunction is, of course, a draconian measure. Without affording the
Defendant an opportunity fully to present its case on the merits, a preliminary
injunction excludes the Defendant from making, selling, etc. the patented
product/process for a period of time until the case is scheduled for a merits-based
evaluation at trial. Essentially, the preliminary injunction preserves the status quo
for that period by temporarily excluding the would-be competitor from the market.
Germany
As with the English Patents Court, there is a general reluctance in Germany to
award pre-trial injunctions.
France
In France, there are preliminary measures - for example, the Saisie Contrefaçon -
which provide the Patentee with a form of interlocutory relief. It does not,
however, amount to a pre-trial injunction.
The Netherlands
The Netherlands appears to be the only European jurisdiction where preliminary
injunctions are routinely granted. But this remedy is only potentially available
where the subject matter in issue is not overly complex.
England and Wales
See 2.1.4 above
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Generally
The overall picture which emerges is that the inherent complexity of patent
disputes does not generally lend itself to summary disposition by, for example, the
grant of preliminary pre-trial injunctions. Where, however, certain circumstances
apply - as in the particularly price-sensitive pharmaceutical market - the Patents
Court has shown itself willing to grant preliminary injunctions coupled with
scheduling an accelerated trial of the action. We do not consider that the UK is
significantly different from other jurisdictions in this respect. We consider this not
to be a major issue in the UK and have no recommendations to make.
3.4 LEGAL REPRESENTATION IN THE UK
3.4.1 In England and Wales, restrictive practices currently governing the provision of
legal and litigation services reduce choice and increase cost. The team of at least
three (patent attorney, solicitor, barrister) remains, typically, the minimum. The
exception to this is the Patents County Court, a forum where patent agents and
solicitors may both conduct litigation and all three professions can be heard. Such
deregulation as has occurred in High Court practice (solicitors can now obtain
rights of audience, and patent agents can be accredited as litigators) has not
significantly reduced costs (see, for example, Panduit v Band It [Patent County
Court 16 March 2001]) or increased choice. Traditional restrictions still remain:
i
barristers in independent practice cannot conduct ltigation; barristers, solicitors
and patent attorneys cannot form a “mixed practice” (but note the current Clementi
review of restrictions against MDPs); and patent agents cannot address the High
Court. Importantly, most patent agents and solicitors still do not see themselves
being able to function effectively as advocates.
3.4.2 The Patent Judges have encouraged other professionals to exercise their advocacy
rights (most recently in a CIPA meeting on 8 May 2003), but inevitably there
remains a perception of (perhaps unintentional) judicial bias towards maintaining
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the arcane procedures in the common law system, which favour barristers trained
and practised in that system.
3.4.3 This, of course, begs the wider question of why we maintain the split
barrister/solicitor profession, which is unique to England & Wales and Ireland and
out of step with all the other Community Member States, the answer to which is
that it is said to give the consumer diversity of choice. However, these remaining
restrictions can result in over- lawyering and unnecessary cost, particularly when
compared to the system of representation in the other main European States as well
as the USA and most Commonwealth jurisdictions. The removal of the remaining
restrictive practices identified in 3.4.1 above should, over time, allow market
forces to determine the most appropriate representation in court and give the
consumer real choice.
3.5 THE VALIDITY ISSUE
3.5.1 Patents as granted are not necessarily valid. Patent Office examiners examine
against prior art identified by the applicant (if any) and prior art found in an official
search. This is usually limited to searchable databases. Other publications, such as
trade literature and company brochures, cannot be reliably searched. Evidence of
prior use, particularly that never recorded in writing, is effectively impossible to
find at the searching and examination stage. It is normally only if an invention is
successful in the marketplace that there is an incentive for others, typically
putative infringers, to search for any means of invalidating a patent, not only
additional prior art but questions of inventorship, behaviour of the patentee and
technical deficiencies in prosecution. Issues of validity are complex and are a
major area of dispute in most enforcement actions.
3.5.2 Accordingly, we believe the Patent Office should consider the introduction of a
procedure which can provide an updated assessment of whether, in the light of such
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new material, the claims as granted continue to meet the requirements for
patentability. This would be aimed at assisting the parties to an infringement
dispute to focus on the real issues and, hopefully, reduce the level of uncertainty
which presently exists (for both parties) at the enforcement stage. This procedure
could be triggered by any party and, once initiated, would require participation by
the patentee at least to the extent of providing an update of potentially relevant new
material which has come to his notice since the grant process.
3.6 DAMAGES
The current criteria applied for evaluating damages seldom adequately reflect the
patentee's true loss caused by infringement, taking all tangible and intangible
losses into consideration, including actual costs, executive time, etc. Effective
damages should act as a deterrent to infringement. Currently they do not, despite a
1997 recommendation from the Law Commission which reflected a very broadly
based consultation, The Law Commission's Report on ‘Aggravated, Exemplary and
Restitutionary Damages’ No. 247 (1997). However, the proposed European
Directive (refer to 2.2 above and 4.10 below) should, if implemented in its present
form, go some way to ameliorate this.
3.7 THREATS
United Kingdom patent law [Patents Act, 1977, s.70] provides measures to prevent
the abuse of patent rights by unjustified threats against certain categories of
infringer. We note that the Patent Office carried out a consultation process on this
topic as part of the consultation on the proposed Patents Bill and published its
results on 14 November 2003. We have not been able to consider the results of
this consultation before submitting this paper.
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4. POSSIBLE SOLUTIONS
4.1 COURT PROCEDURES - FURTHER ABBREVIATED PROCEDURE
4.1.1. The following measures should be seen in the context of the underlying issue,
which is whether the, perhaps overly, forensic approach to patent litigation enabled
by the common-law-driven procedures should be rigorously revised. There is now
a unique opportunity with the Community Trademark, the Community Design and
the coming Community Patent for a total overhaul of procedure in the Patents
Court – which overhaul should not be restricted only to patent enforcement but
should embrace all IPRs – to bring it more in line with procedures in the rest of the
European Union. The challenge for Government is to seek to lead the way in the
context of the EPO's EPLP proposal and the structuring of the enforcement
procedure for the Community Patent. The EPLP proposal contains, we believe, a
workable blend of common law and civil law procedures.
4.1.2 We were told that the Streamlined Procedure in the Patents Court and the Patents
County Court (see Appendix 1) is not used. We believe that the procedure should
be actively publicised and promoted, and that the Patents Court Users' Group
should consider the following proposal for a further abbreviated procedure in the
Court:
• Claimant driven.
• Three rounds of written submissions.
• Case Management Conference (CMC).
• Judge chooses future path from 3 options:
(1) immediate court case,
(2) limited fact finding, or
(3) referral to Patents Court (High Court)
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• CMC written record appealable.
• Possible cap on costs.
(See Appendix 3 for more detail.)
We believe that this procedure should be made available in the Patents
County Court and Patents Court to further reduce costs and with the view of
acting as a model for a correspondingly low-cost procedure associated with
the Community Patent.
4.1.3 This system will only work if judges are allocated adequate time to read papers in
advance of trial. A more accessible system along the lines of the proposed Further
Abbreviated Procedure will inevitably mean significant increase in cases and a
concomitant need for more patent judges. Given the need, in any event, for a total
re-appraisal of the present system for litigating patent matters in this country, this
could provide an opportunity now for a new approach to judicial appointments.
This should include senior IP solicitors and patent attorneys who wo uld provide a
well qualified resource and, in terms of judicial background, a Patents Court which
more proportionately and transparently reflects the professions employed in patent
matters. We recommend that all IP disciplines should be considered for
judicial appointments to a Patent or IPR Tribunal. We are not suggesting the
expansion of the pool of qualified applicants for the general High Court
jurisdiction .
4.2 COURT PROCEDURES - APPEALS
4.2.1 The benefits of introducing a Further Abbreviated Procedure (see 4.1 above) could
be severely compromised if appeals could be lodged effectively as of right and
used tactically by the "deep pocket" litigant to increase the cost of a case and/or to
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make it more protracted. Judgments of the Patents County Court and High Court
fall within the Civil Procedures Rules 1998, Rule 52.3 and so require leave to
appeal. Currently, however, leave is routinely granted as a matter of course
regardless of the merits.
4.2.2 It is recommended that appeals from the Patents County Court or High Court3
should only be allowed if they concern an issue of law and/or factual issues which
merit review by the Court of Appeal. Leave to appeal should be decided, usually,
on brief paper submissions (less than ten pages) with a hearing only if requested by
one or both parties or the Court. Also, we recommend that this should be
coupled with an Abbreviated Appeals Procedure . An example is the managed
approach taken by the US CAFC, with its focus on written submissions (usually
grounds of appeal, respondent’s reply, and appellant’s answer) and a hearing at
which Counsel are permitted only brief submissions, the oral proceeding being
primarily for the Court to put its questions to the parties.
4.2.3 Ideally, all disputes concerning European IPRs, including national patents granted
via the EPO, should be dealt with by a single IP Court of First Instance with appeal
to a Central European Court of Appeal, which would be the final appellate
authority on all IP issues, including appeals from the EPO. Such a court is likely
to be a special chamber of the European Court of Justice to which appeals from
national courts under IP Directives and European IPRs, such as the Community
Trade Mark and the Community Design Right, would ultimately be made. Should
the inclusion of the EPO within this appellate jurisdiction prove impossible,
then we suggest that members of the ECJ IP Court should also be appointed
to the EPO Enlarged Board of Appeals.
3
This would include judgments in actions litigated under the Streamlined Procedure and the proposed Further
Abbreviated Procedure.
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4.3 DEREGULATION OF PROFESSIONAL ROLES - REMOVAL OF
RESTRICTIVE PRACTICES
4.3.1 Competition would be increased by reducing the barriers to entry identified in
Section 3.4 above and thereby increasing diversity of choice of advisor.
4.3.2 For example, some barristers' chambers may enjoy relatively modest overheads and
provide correspondingly competitive fee rates. However, they are presently unable
to provide litigation services directly to the lay client. We believe there is a
demand, particularly at the SME level, for access to multi-skilled teams - for
example, dual- qualified practitioners and mixed partnerships . In this way "one-stop
shop" IP services could be provided by relatively small units. Presently, this is
only on offer from certain large firms and even then only sparingly. Deregulation,
specifically in the areas identified in the following paragraphs, should make
litigation services more accessible to SMEs and start-ups. We see no compelling
reasons to maintain the status quo, particularly when it results in the highest cost in
Europe (see Section 3.3 above). By removing these barriers, market forces will
dictate success or failure. Professional bodies will continue to ensure maintenance of
standards and protect consumer interests.
4.3.3 We recommend the following changes:
i) Regulations which prevent barristers in independent practice from
forming partnerships or undertaking management and conduct of the
entire litigation process should be abolished, as they have been for
employed barristers.
ii) Patent attorneys should be able to offer High Court advocacy services
with an appropriate advocacy qualification. Further, any prohibition
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against dual practice as a patent attorney and a barrister should be
removed.
iii) Regulations which prevent the formation of multi-disciplinary
partnerships comprising two or more of barristers, solicitors and
patent attorneys should be abolished.
iv) More public information on the availability and options for
representation.
4.4 ALTERNATIVE DISPUTE RESOLUTION (ADR)
4.4.1 Following the Woolf reforms of litigation procedure, parties requesting a trial date
must certify that they have considered Alternative Dispute Resolution. There has
therefore been, over the last 3 years, an increasing emphasis on ADR, mediation
being the usual form. There is, however, still resistance in practice to embracing
fully this potential low-cost, fast method of dispute resolution. But, with the
increased use of mediation, the courts have gradually become bolder in its
application. For example, adverse costs orders have been made against parties
who fail to approach the mediation seriously. Case law in this area is still
developing.
4.4.2 In cases involving IPRs, the use of mediation has thus far been sporadic. It has,
probably, been most used in trademark and passing-off, rather than patent matters.
This may be because of a perceived misconception that, because the mediator has
no jurisdiction to rule on the validity of a patent, the procedure is unlikely to
produce results. This, however, is rooted in failure to understand the mediation
process. It is not an adjudicative process. It is designed to facilitate settlement.
For example, there is nothing to preclude an agreement made through mediation
which provides that, inter partes, a patent is or is not infringed by a certain product
or process.
- 29 -
4.4.3 Mediation is already successfully employed in the County Court system in non-
IPR matters and is widely used in IP disputes (including patent matters) in other
major jurisdictions, for example Australia and a number of States in the USA.
4.4.4 We propose that mediation be mandated in the Patents Court on a trial basis,
say for 12 months. The parties will be ordered at the Case Management
Conference to enter into a mediation process, maximum duration of six to eight
weeks, unless this has already been tried and failed. The action will be stayed for
that period. There should be provision for the Court to call for a Report from
the Mediator on the question of costs, the rationale being that the attitude of
the parties to an unsuccessful mediation may be relevant to exercise of the
Judge's discretion on costs. This Report would, of course, only be available after
judgment.
4.4.5 We have considered Prof. Kingston's proposal that patent disputes should be
subject to Compulsory Arbitration, rather than litigated in Court. We have given
careful thought to the basis for this proposal but we believe that it would not
improve access to justice in contested patent matters. It is just another adjudicative
process but one which is restricted inter partes rather than erga omnes where
issues of validity and infringement are adjudicated by the Court. We say this
subject to one qualification, which is that there may well be a role for the
arbitration in international patent disputes. Indeed, with the present procedural
disparities between the common law and civil law procedures in Europe and a
tendency towards inconsistent outcomes where the same substantive law is applied,
international arbitration on a Pan-European level may be useful as an alternative to
litigation before the national courts of the Member States.
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4.5 PATENT OFFICE INVOLVEMENT - PATENT VALIDITY
Re-examination
4.5.1 If, subsequent to grant, further material comes to light which is relevant for
assessing patentability, there is currently no mechanism whereby the patentee can
have it taken into account at the Patent Office level unless the patentee wishes to
amend the claims. In the same way as the Patent Office considers patentability in
the light of material available during prosecution, there seems no good reason why
it should not carry out a fresh "substantive examination", with the result that either
the Examiner agrees that the existing claims are still patentable, or raises
objections which, as prior to grant, the patentee can answer by way of amendment
and/or argument. Once the Examiner is convinced that the requirements for
patentability are (re)met, the patent continues, possibly in amended form. While
the actual chance of ultimate validity of the emergent patent may be no higher or
lower than the patent as originally granted, third parties would at least know (as,
indeed, would the patentee) that patentability has been reassessed in the light of
material which was not considered during the original examination. The details
would be open to public inspection on the open file. IPAC recommends that the
UK Patent Office should provide such a parallel procedure and that it
should be tabled by Government in international discussions on patent
practice harmonisation. While the use of the procedure might not be frequent, it
could become a useful tool for patentees and would-be infringers alike and might
avoid litigation. This could be particularly effective if the potential or actual
infringer took part in the re-examination proceeding, whether as a mere intervener
or more actively. It would not appear to place on the Patent Office any material
extra burden, or require any further examiner training.
Amendment
4.5.2 IPAC welcomes the move to remove from consideration of a proposed claim-
limiting amendment the need to enquire as to motives or background, or indeed to
provide reasons. So long as any proposed ame ndment is, as a matter of
- 31 -
construction, one which limits the scope of the claims, it should simply be allowed
on payment of a fee to cover the cost of assessment and printing of a revised set of
claims or specification. The rectitude of the amendment can still be subsequently
challenged in a re-examination or court action. Amendment could be the subject,
accordingly, of two types of proceeding, a less expensive one as just outlined, in
which no consideration would be given to any material other than the specification
and claims in unamended and amended form, and a more interactive one as set out
in the preceding subsection. We agree with the proposal in the Patent Office
Consultation on the proposed Patents Act (Amendments) Bill that opposition
should no longer be allowed in amendment proceedings, but only on the
understanding that a re -examination procedure would be introduced in the
form outlined above. We recommend this be implemented.
Effective, Timely Procedures
4.5.3 The Patent Office should be required to conduct re -examination and
amendment proceedings according to strict timescales, to avoid patentees' or
users' rights being prejudiced for extended periods . The object of these
suggested procedures is to reduce uncertainty about validity. This, in turn, should
have a knock-on effect of helping to reduce the incidence of litigation and promote
resolution by ADR.
4.6 UPDATED PATENT VALIDITY ASSESSMENT (LEGALLY NON-
BINDING)
4.6.1 If a patentee elects not to submit his patent to re-examination or believes there is
no new material prior art which has emerged since grant, it is nevertheless "good
practice" to carry out an internal review before enforcing a patent. To encourage
this, IPAC suggests that consideration should be given to mandating in a pre-action
protocol a requirement that such an independent and objective review has been
conducted prior to issue of proceedings. We recommend that The Patent Office
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should consider offering such a service. The judge would then be obliged to
investigate this when costs are being adjudicated after judgment on the substantive
issues of infringement and validity. An unsuccessful Claimant, who was found not
to have conducted such a review, would, in the absence of exceptional
circumstances, be penalised on costs.
4.6.2 Such an updated patent validity assessment service by the Patent Office would also
be of potential benefit to the Patentee when seeking insurance cover or company
finance, both of which could facilitate enforcement of patents.
4.7 PATENT COS T INSURANCE AS A MEANS OF ENABLING
ENFORCEMENT
4.7.1 We recommend that Government monitors progress in this area, both
nationally and at an EU level, and considers participation in any EU-wide
projects designed to explore whether an effective system acceptable to both
patentees and users can be developed, particularly in relation to the forthcoming
Community Patent.
4.7.2 We also recommend the setting up of a Working Party to investigate whether
an Insurance Scheme for Patents can be commercially viable. The proposals
advanced in this Paper, which are designed to reduce costs and reduce the present
uncertainty as to validity, may enable greater commercial viability for such a
scheme than is possible with the prevailing high-cost, high-risk system.
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4.8 ALTERNATIVE FEE ARRANGEMENTS
Maintenance
4.8.1 Generally speaking, provision of legal fees by a third party to assist a party to
litigation is permitted. There is, however, what others term “the English Rule”,
where the successful party recovers its costs from the unsuccessful party. As a rule
of thumb, the recoverable element is about two-thirds of the winning party’s actual
costs, that is to say the costs of barrister, solicitor and expert witnesses; but seldom
the costs of that party’s own lost time occasioned by the litigation. Costs awards
are at the discretion of the Court. This, not unnaturally, gives rise to some
inconsistencies. On the other side of the coin, where a party has been financed by
Legal Cost Insurance, the Insurance Company - in the event of a decision adverse
to the insured - will be liable to pay costs up to the limit of the insurance cap.
Conditional Fee Arrangements
4.8.2 Another possibility is an agreement between a party and his solicitor that the
solicitor will either not charge fees at all or will charge only at an agreed lower rate
in return for payment of fees at a higher level (subject to a cap of a 100% uplift of
the fees actually charged) in the event of success. This is a relatively new
developmentand has been most used in personal injury litigation. It is still in
somewhat of an evolutionary state, with decisions of the Court currently issuing as
to what is properly recoverable under such agreements, for example, where a very
early settlement of the claim occurs and the solicitor’s exposure to the contingency
risk has been minimal.
Contingency Fees
4.8.3 The US-style Contingency Fee is a bargain between the party and his lawyer that
the lawyer will either charge no fee or a reduced fee in return for a percentage of
the dama ges received either upon settlement or at trial. Presently, this is not
- 34 -
permitted in this country. An exception occurs in relation to insolvent companies,
where the Liquidator can agree to fund an action in return for a share of the
proceeds. It is also possible to sell the right to bring an action, known as
assignment of a chose in action. A patentee can, therefore, sell its right to sue for
infringement of its patent(s) to a third party. A variant of this would be an
assignment of the patent for the purpose of bringing a specific action, with
provision to re-assign the patent to the proprietor at the conclusion of the litigation.
The Community Patent
4.8.4 To date, we have three registered Community IPRs, the Community Design, the
Community Trade Mark and the Community Plant Variety Right. In the future, we
will have the Community Patent, where infringement and validity will be judged
for all Member States. The stakes - injunction and damages - will be
correspondingly higher than at present where only national patent rights exist,
namely a nationally registered GB patent or a patent registered under the European
Patent System, an EP (UK). With the advent of the Community Patent,
consideration should be given now to legalising US style contingency fees.
Questions which should be addressed include:
i) Is it an unjustifiable relic of the past that such arrangements are not
permitted at present?
ii) Are such arrangements appropriate only in the US where patent
enforcement costs are significantly higher than in this country?
iii) Does US experience suggest any drawbacks of which a British system
should take account?
Conclusions
4.8.5 The debate surrounding alternative fee arrangements is, we suspect, in large
measure the result of the high cost of patent enforcement in the English Patents
- 35 -
Court. To permit US style contingency fee arrangements would not remedy the
present shortcomings of the English system. The real issue to be faced is
improving access to justice for patent enforcement in terms of the existing
procedure. It is those procedures which, as stated, the Enforcement Group
consider require fundamental reappraisal. But, in the immediate term, we
recommend that the current ban on adoption of US style contingency fee
arrangements for patent disputes is relaxed or abolished on a trial basis.
This would enable a more in-depth assessment to be made of the rules of other
EU Member States in this respect and of the differences (if any) which those rules
produce. It would also produce data from which a considered re-evaluation could
be made of the benefits/disadvantages of contingency fees.
4.9 CORPORATE GOVERNANCE
4.9.1 Voluntary or compulsory procedures of Corporate Governance in relation to IP
would automatically raise awareness of IP in the minds of company directors and
shareholders and, vice-versa, an IP awareness campaign will assist Corporate
Governance in the knowledge economy. We recommend that consideration
should be given to the proposal that an audit of IP should form part of any
company's annual audit. Such an IP audit should include a risk assessment of
the company's IP portfolio and any patent notifications by other patent
owners implying or directly asserting patent infringement. This should form
part of the annual report and accounts, at least to the extent that a statement
that such an IP risk assessment has been undertaken would form part of the
"signing off" responsibilities of the directors. A maximum of 3 years to
consider and decide on suitable measures is recommended.
4.9.2 The DTI has recently completed a consultation on the proposed contents of an
‘Operating and Financial Review’ (OFR) which would detail the strategies and
issues facing a company. The handling and management of IP could usefully form
part of such a Review in due course.
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4.10 PROPOSED EU DIRECTIVE
4.10.1 Appendix 4 summarises the proposed "Measures and Procedures to ensure the
Enforcement of Intellectual Property Rights", including patents.
4.10.2 IPAC broadly welcomes and supports the proposals which, if enacted, would
dramatically improve the enforceability of patents in Europe. We hope that
Government will support finalising and then quickly implementing the
proposed Directive, with the proviso that the Criminal Law provision (Article 20)
should only be applied in the most extreme circumstances of patent infringement.
4.11 INTERNATIONAL
4.11.1 Appendix 2 reviews some overseas patent systems and identifies areas for
improvement. IPAC appreciates that Government’s ability to influence practice in
other countries is limited but, given the importance of this to British business,
IPAC recommends that it brings what influence it has to bear on enforcement
issues.
4.11.2 As previously stated, we believe that, ideally, disputes concerning the validity or
infringement of a national patent right granted by the EPO should ultimately be
resolved by a single European appellate court (see 4.2.3 above). Indeed,
infringement and validity of Community Patents will eventually be decided by a
Community Patent Court of First Instance with a right of appeal to a Community
Patent Appeal Court. However, implementation is unlikely before 2010. In the
meantime, national courts will have jurisdiction over Community Patents as local
registries for the Community Patent Court until it is established in Luxembourg.
- 37 -
4.11.3 We propose that Government should press for the creation now of a
European Court for Patent Appeals, similar to the US Court of Appeals for
the Federal Circuit. The rationale for this would be to develop precedential case
law, which would provide guidance for, and would be binding upon, the Member
State Courts of First Instance. The obvious benefit should be to avoid the
inconsistency of outcome which is currently too often experienced where the
Nationa l Courts are applying harmonised substantive patent law but reaching
different decisions.
4.11.4 This Court could be the special chamber of the Court of Justice, Luxembourg to
which Appeals from the Office for Harmonisation of the Internal Market (OHIM)
are already available in Community Trade Mark and Community Design cases.
4.11.5 The European Patent Organisation has already proposed a European Patent
Litigation Protocol (EPLP) [see paragraph 4.1.1 above] and, given the generally
accepted failings of the existing national processes, Government should
encourage the European Commission to co-operate with the EPO in this
respect. Indeed, it could provide a useful test-bed for the proposed Community
Patent Litigation system. As already noted, in terms of procedure, the EPLP
provides an attractive middle way between the existing common law adversarial,
and civil law inquisitorial, processes.
4.11.6 In such a system, it is recommended that, as in the inquisitorial system, the
judiciary exercise firm control of the management of cases so that issues are
clarified early and steps necessary to resolve them are identified. That would
allow for a form of disclosure and of cross-examination proportionate to the issues
being tried. Also in such a system, validity should be available as a defence to
infringement and should be triable alongside infringement by the court as it
presently is in this country.
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4.11.7 In certain parts of Asia (especially PRC) the UK should promote to opinion
formers the positive role of IP in a modern economy.
4.11.8 Globally, the UK should promote more consistent enforcement systems for
handling multi-jurisdictional disputes which, in turn, should assist in
establishing more harmonised procedures at the national level, both in Europe
and other jurisdictions of particular importance to British industry.
4.12 FILE WRAPPER ESTOPPEL
Consideration should be given to finding a way of preventing the enforcement of a
patent on the basis of arguments which are inconsistent with representations made
in the course of the prosecution of the application. We recommend that
Government consider either some form of declaration or disclaimer which
would ensure that failure to disclose the existence of material affecting the
claims would adversely affect an infringement action. We do not believe that
the American procedure of file wrapper estoppel is, in the long term, a
desirable approach to the problem.
4.13 PATENT DEFENCE UNION
IPAC has considered the proposal for a Patent Defence Union. While not
dismissing or endorsing the idea, IPAC does not consider this a priority for
government support in relation to the enforcement of patents ahead of the
implementation of the recommendations made in this report.
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4.14 PATENT ENFORCEMENT FUND
It has been suggested that a Fund should be established into which a percentage of
all patent fees (application, grant, renewals) is contributed. This contribution
would be mandatory. Companies who could demonstrate a good prima facie case
on both validity and infringement (supported, for example, by a Re-Examination
patent or at least an opinion from a patent lawyer) could apply for grants from the
Fund to enforce/defend their patents. We do not recommend exploring this further
at this time ahead of implementatio n of the recommendations made in this report.
4.15 TAX INCENTIVES
Tax incentives to inventors and SMEs to obtain and exploit registered IPRs
(whether directly or by licensing) in the form of reduced corporation or income tax
have been suggested. For examp le, Ireland offers such tax incentives. IPAC notes
that tax benefits do apply in some IP related areas, including films and Research
and Development.
4.16 LICENCES OF RIGHT
We have observed that the fact that renewal fees may be halved for voluntarily
endorsing the patent may not be fully recognised by patentees, particularly SMEs.
We recommend that the ability to halve renewal fees by endorsement of the
patent “licences of right” should be more vigorously promoted.
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4.17 DATA AND EVIDENCE
The lack of hard data and evidence on IP issues inhibits good analysis. As we
have previously recommended, in January 2003, this needs to be remedied.
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APPENDIX 1
STREAMLINED PROCEDURE
(www.courtservice.gov.uk/using_courts/guides_notices/notices/pats/pats_guide.htm)
The following is copied from the above website with some typographical corrections.
1. Nature of a streamlined procedure
A streamlined procedure is one in which, save and to the extent that it is
otherwise ordered:
(i) all factual and expert evidence is in writing;
(ii) there is no requirement to give disclosure of documents;
(iii) there are no experiments;
(iv) cross-examination is only permitted on any topic or topics
where it is necessary and is confined to those topics;
(v) the total duration of the trial is fixed and will normally be not
more than one day;
(vi) the date for trial will be fixed when the Order for a
streamlined trial is made and will normally be about six months
thereafter.
A streamlined procedure also includes minor variants of the above (e.g.
disclosure confined to a limited issue).
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2. Criteria for a streamlined procedure
The court will order a streamlined procedure by agreement or, in the absence of
agreement, where application of the overriding objective indicates that it is
appropriate. Particular emphasis will be placed on proportionality, the financial
position of each of the parties, degree of complexity and the importance of the
case.
3. When to apply for streamlined procedure
Any party may apply at any time after commencement of the action for a
streamlined procedure. Any such application should be made at the earliest time
reasonably possible, which will generally be at the case management conference
required by PD63 4 within 14 days after service of the defence.
4. How to apply for a streamlined procedure
A party wishing for a streamlined procedure should, in the first instance, invite the
other party(ies) to agree, setting out the proposed procedural steps in a draft Order.
If there is agreement, the court will normally make the Order on a written
application signed on behalf of each party. The parties should liaise with each
other and the clerk to the Patents Court or the Patents County court concerning a
date for trial so that this can be fixed.
If there is no agreement, the party wishing for a streamlined procedure must make
an application for it, setting forth the proposed procedural directions in his
application notice and requesting that the application be determined on paper. He
should support the application by a witness statement addressing the criteria in
CPR Rule 1(2) 5 . The opposing party must, unless he obtains an extension of time
(by consent or from the court) make and serve on the opposite party a witness
statement in response within 10 days of service upon him of the application notice.
4
http://www.dca.gov.uk/civil/procrules_fin/contents/practice_directions/pd_part63.htm
5
http://www.dca.gov.uk/civil/procrules_fin/contents/parts/part01.htm
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The court will determine the matter provisionally on paper alone and make a
provisional judgment and order accordingly. Unless either side seeks an oral
hearing the provisional order will come into effect 7 days after its service on the
parties.
If a party is desirous of an oral hearing, it must, within 7 days of service upon it of
the provisional order, seek an oral hearing in the immediate future by contacting
the clerk to the Judge in charge of the patent list. Such an oral hearing will fixed as
soon as is practicable, either by way of a telephone hearing or a short application.
5. Duty to inform clients
The parties' legal advisers must draw their clients' attention to the availability of a
streamlined procedure in the Patents Court and the Patents County Court.
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APPENDIX 2
OVERSEAS PATENT SYSTEMS
(including Compare and Contrast Table)
1. USA
1.1 IP Litigation is especially expensive in the US. Costs of the order of US$3-4
million are typical for both parties in an infringement case in which validity is
challenged. As costs are not awarded other than in exceptional cases, litigation is
an economic strain on the patentee unless the potential for recovery of damages
exceeds the costs involved.
1.2 In the USA, a granted patent is presumed to be valid and there are no revocation
proceedings. With the decline in examining standards, some patents are being
granted which should be refused. Patents can be challenged by "Re-examination"
or by "Protest" in the original examination prior to grant (now that US patents are
published after 18 months), in a "Re-examination" or in a "Reissue" requested by
the patentee. Validity can also be questioned as a defence in infringement
proceedings.
1.3 Owing to their complexity, Patent cases should be heard before specialist judges.
In the US, patent actions are tried before a non-specialist district judge and
normally a jury. The specialist jurisdiction (the Court of Appeal for the Federal
Circuit) is reserved for appeals. This increases the costs and uncertainty of the
process since it calls for instructing the judge and jury about the technical
principles that the case involves and requires non-experts to make determinations
of fact for which they are ill equipped.
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1.4 Other factors increase costs and complexity. First, the pre-trial process frequently
involves extensive depositions and discovery disproportionate to the value of the
issue. Secondly, collateral issues often become prominent, eg, forum shopping,
allegations of wilfulness, fraud or other inequitable conduct. Proving such
allegations calls for discovery, cross-examination and a defence, all of which adds
further to the cost burden and delays early resolution.
1.5 Jury trials are likely to remain a feature of IP litigation. Recent decisions
(Markman, Warner Lambert and Festo) seem in principle to have limited the
influence of juries and would pave the way for a specialist first instance judiciary.
The enforcement position could be improved by the introduction of a more
rigorous opposition procedure for patents, as is already the case for trade marks,
and a single specialist federal court to try IP matters at first instance. The
appointment of specialist judges would reduce forum shopping particularly if there
were rotation of the judges between courts and judges’ conferences were
encouraged to harmonise standards. A harmonised standard would allow
arguments about jurisdiction to be set aside robustly.
1.6 Owing to the size of the US market and the overall levels of damages that can be
awarded, it is likely that US patent litigation will always be more complex and
expensive than elsewhere. However the advent of a global market and the
assimilation of national and regional economies into a global economy will call for
more globally consistent patent enforcement systems. The possibility of initiating
direct changes to the US system even taken at EU/WIPO level may be over-
optimistic. Change might be sought by degrees by supporting at EU and WIPO
levels, developments such as the American Law Institute draft Principles for
handling multi- national IP disputes, which develops the Hague Convention on
Enforcement. The promulgation of such common principles might spin-off
common principles and processes the courts might adopt for national patent
disputes that might be adopted across Europe and the US.
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2. Asia
2.1 Attitudes to copying and counterfeiting by local businesses and administrations
seems to be ambivalent. Some regard it as reasonable competition whilst other
regard it as criminal. There is also an ambivalent view about the desirability of
patent rights. Many regard them as a means by which European and US
companies inhibit the introduction of new technologies into the region and
maintain high margins for imported products. Others regard them as necessary to
promote and protect technical innovation.
2.2 China is, for most businesses, the biggest single Asian market with a rapid growth
rate and substantial growth potential. As some priority setting is called for in this
region, it is recommended that the PRC administration should be chosen as the first
priority for diplomatic influencing.
2.3 In compliance with its TRIPs obligations, the PRC has recently updated its
substantive law on enforcement and has increased the number of IP Judges to
enforce IP rights. However, British industry suffers substantial damage arising
from patent infringement. These losses are in greater proportions than those
suffered in other jurisdictions. Sector related reports concerning the impact of such
infringement and calling for stiffer penalties (e.g. IPR Issues for UK Chemical
Companies in China; 2 July 2002) have been submitted to the DTI.
2.4 China, in common with other Asian economies, may be at a stage where
indigenous innovation is limited and copying is regarded as the accepted means by
which knowledge is transferred and competition is developed. It is thought that
respect for and enforcement of IP rights will remain an issue until indigenous
Chinese industry and the national administration appreciate how their economy can
benefit from such rights and go on to appreciate how such rights operate.
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2.5 Diplomatic efforts at WIPO/EU levels supported by the UK Government to explain
the positive role of IP to the administration together with the education of opinion
formers in industry and the judiciary via seminars, training and exchanges are
called for to improve the situation.
3. Compare and Contrast
A Compare and Contrast review of patent enforcement systems in the UK, France,
Germany, Holland and the USA is summarised in the table below.
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Procedure England France Germany Holland USA
Number of High Court: 2 1 lawyer and 1 1-2 1-2 Lawyers and A trial team of at
lawyers attending solicitors, 2 patent agent patent agents least 4 lawyers and
trial barristers and, in heavy cases
often, 1 patent many more.
agent
PCC: 2 to 3
(barrister and/or
solicitor and/or
agent
Document Yes, subject to No, but saisie No, but increasing No, but orders for Yes, very
production direction from the common scope for seizure specific extensive
discovery Court at First Case documents document
Management possible production and
Hearing wide ranging
depositions, both
in relation to
potentially
discoverable
documents and
subsequently on
the substantive
issues..
Experiments Yes, with leave. No No No Yes
Complex and
costly procedure
Expert Witness One per party, No No – normally No Yes
unless additional appointed by the
experts agreed at Court
Case Management
Hearing
Court appointed Very rare Not usually Yes Possible, but rare.
Experts Patent Office may
also be asked for
advice
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Procedure England France Germany Holland USA
Preliminary Pre - Rare, except Rare, as in Yes, both in full Yes, but rare
trial injunctions where Def's cross- England & Wales proceedings on
undertaking in the merits and in
damages separate summary
inadequate proceedings (kort
geding)
Time to trial High Court: 9-15 Fast Track – 2-3 9-18 months Full procedure 12 1-2 years
months months infringement in to 18 months upwards.
District Court
PCC: 8 months First Instance – Accelerated - 10
12-18 months 2-3 years validity 12 months, no
in Federal Patent delay possible
Court
Summary –
depending on
urgency, from 1
day to 2 or 3
months
Length of trial 1 to 5 days 2 hours 1 day ½ day 2 – weeks
upwards.
Cost High Court: £1m Euros 30/50,000 Depends on Scale Euros 10,000 – US $ 2 to 4
fees but, typically, 20,000 for Million upwards.
a quarter or less summary
than in England. proceedings,
PCC: £150 - E.g. Euros 25- Euros 40,000 for a
£250K 50,000 First simple action
Instance.
Specialist Court Yes In Paris only Yes both in the Yes Not at first
principal District instance, only on
High Court: 3 Court jurisdictions appeal.
Judge of Dusseldorf,
Mannheim;
PCC: 1 Judge Munich and
Hamburg and also
in the Federal
Patent Court.
Appeal from First With leave but, Yes Yes Yes, District Yes
Instance typically only a court, 3 judges
formality (simple matters or
summary
proceedings, 1
judge)
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Procedure England France Germany Holland USA
Appeal to With leave of Yes With leave of Yes Yes, with leave.
Supreme Court Court of Appeal Court of Appeal
or House of but usually
Lords and rarely granted
granted
Award of Costs Successful party No Loser pays scale Loser pays No except in certain
should obtain 2/3 costs - approx administrative limited circumstances
actual costs but 5% of value of fees of court
subject to claim proceedings,
appointment usually low,
between the 2,000 – 10,000
parties on issues Euros
won/lost
Actions filed p.a. N/A 300-400 500-600 many Est: 100 plus N/A
SMEs
Actions tried p.a c.25 200-300 300-600 Est: 50 to 100 N/A
Documents Typically, Documents Documents all Briefs and Extensive documents
produced for trial bundle(s) agreed included in included in exhibits, produced for use in trial
between the parties parties consisting of the
parties statements. statements. All documents
produced at trial referred to in the
party's statement
Availability of Discretionary, yes Yes Yes, including Yes
injunction but usually cross border
awarded to
successful party
Availability of Account of Yes, but low Yes, usually Yes, may be Yes, punitive (triple)
damages Profits or Loss of royalty based calculated on the damages available
Profits. No basis of lost
exemplary/puniti profits or royalty
ve damages based. No
punitive
damages.
Usually to be
calculated in
separate
proceedings,
usually settled
out of court
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APPENDIX 3
FURTHER ABBREVIATED PROCEDURE
We support the "Patents County Court – IP Court User Group's Proposal" of 6.1.03,
which may be referred to as a "Further Abbreviated Procedure". This proposal
provides an outline for a simpler and cheaper IP litigation in circumstances where
the parties want it or where the court directs it.
(a) The choice of forum would be claimant driven although there would be a safety
valve so that Judges could transfer cases where it was plainly sensible to do so.
(b) The Patents County Court proceedings would start with three rounds of written
argument (akin to EPO practice) with strictly controlled time- limits.
(c) A Case Management Conference (CMC) with the Judge would then take place
very shortly thereafter where one of three decisions would be taken (1) to go
forward directly to a hearing without further fact finding, (2) to order a limited
amount of fact finding based upon specifically identified issues clearly material to
the trying of the case or (3) order transfer to the Patents Court for a full exploration
of the evidence consistent with the current practice under Woolf. Options (2) and
(3) would be at the discretion of the Judge but the parties would have the
opportunity to present arguments in support of their position.
(d) In the case of option (1) the Judge would also decide, based upon argument by the
parties, upon whether expert evidence was needed on any particular point. Such
evidence would be submitted in the form of witness statements before the hearing.
The parties would have the opportunity to cross-examine any experts.
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(e) It is envisaged that the evidence submitted under (1) or the fact finding enquiry
under (2) would be relatively simple and very focused. Cases requiring a
significant collecting of evidence (e.g. proving prior use or the conducting of
anything other than very simple experiments where there was no real scope to
make a challenge) would be candidates for transferral to the Patents Court.
(f) A written decision of the CMC would be produced which would form part of the
record for appeal.
(g) A procedural step would be needed in the Patents County Court procedure to allow
transfer of appropriate cases to the Patents Court at an early stage. The Court could use its
discretion to put a cap on the defendant's costs if an SME claimant used the PCC.
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APPENDIX 4
SUMMARY OF THE PROPOSED "DIRECTIVE OF THE EUROPEAN
PARLIAMENT AND OF THE COUNCIL ON MEASURES AND PROCEDURES
TO ENSURE THE ENFORCEMENT OF INTELLECTUAL PROPERTY
RIGHTS." Commission of the European Community.
The proposals in the Directive draw on best practice in the Member States and include:
General provisions (Articles 3-6) - provision of proportionate measures and procedures
to enforce IPR so that infringements are punishable by penalties. There would be
recognition of rights management or professional defence bodies as entitled to apply for
enforcement measures on behalf of rights holders and presumptions for copyright.
Evidence (Articles 7-8) - measures to enable judicial authorities to order the
communication or seizure of bank, financial or commercial documents together with
supporting evidence protection measures.
Right of information (Articles 9) - provisions of a right of information regarding the
origin of goods or services that are thought to infringe an IPR.
Provisional and precautionary measures (Articles 10-11) - make available provisional
measures, such as injunctions, to prevent the infringement of IPR based on reasonable
evidence from the applicant. These to include, in appropriate cases, injunctions to freeze
the assets of the alleged infringing party.
Measures resulting from a decision on the merits of the case (Articles 12-16) - without
prejudice to the damages due from an IPR infringement, the judicial authorities may order
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various measures such as the recall of infringing goods, their disposal or destruction and
preventive measures.
Damages and legal costs (Articles 17-18) - judicial authorities shall order an infringer to
pay the right holder adequate damages in reparation for an IPR infringement. These
damages set at double the royalties or fees if the infringer had been an authorised user of
the IPR, or compensatory damages corresponding to the actual loss with the legal costs
borne by the offending party.
Publicity measures (Article 19) - the judicial authorities may order, at the request of the
right holder that a judicial decision is published at the expense of the infringer.
Criminal law provisions (Article 20) - serious infringements of IPR should be treated at
criminal offences and appropriate criminal sanctions including imprisonment should be
provided.
Technical measures (Articles 21-22) - without prejudice to particular provisions
applicable to copyright, related rights and sui generis right of the creator of a database,
appropriate legal protection should be provided against the manufacture, import,
distribution and use of illegal technical devices. Codes of conduct aimed at the
enforcement of IPR shall be encouraged.
Administrative cooperation (Articles 23-24) - three years after its implementation, there
shall be an assessment of the effectiveness of the Directive and national correspondents
shall be designated to encourage co-operation and communication.
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